Awkward! How to Handle Sticky Money Situations

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There are few things that come between friends and family members as easily as money. From neglecting to pay back borrowed funds to dividing the tab on dinners (or cabs, vacations, you name it), cash can cause friction and hurt feelings.

In my own relationships, I’ve learned that money tendencies vary by the individual. And while I know that being upfront about my expectations — to be paid back, to split the bill — is the best way to mitigate tensions, it’s not always easy. Here are six common situations in which money and friends might mix — plus expert advice on how to handle them gracefully.

You Lent Money to a Friend, But She Hasn’t Paid You Back

Even a small amount of money can drive friends apart, says financial expert Catey Hill, so if you’re thinking about lending money, tread lightly. The amount of money in this situation can make a big difference — paying for someone’s latte is far different than covering her mortgage payment obviously. However, it's still good practice to never loan more than you can afford to lose, according to Irene S. Levine, PhD, friendship expert and psychiatry professor at the NYU's Langone School of Medicine. Expecting that you may never see that money again will keep you from being bitter about why it hasn't been repaid.

Most of us don't have money we can give freely, so be upfront about getting paid back as soon as you lend the money, says Manisha Thakor, CFA, founder and CEO of MoneyZen Wealth Management. "Say: 'I don't want this to come in the way of our relationship. When do you feel you can pay this back, and how would you like me to handle it if that date passes and you haven't paid me back yet?'" she says.

If a friend or family member is going through a rough patch and you’d like to help them out financially with a large sum, Hill suggests putting it in writing. “It sounds awful and uncomfortable to a lot people, but if you really want to help your friend, you have to be honest and upfront," she says. Be sure to outline how much money you are lending and make up a timeline for how the money will be paid back.

Also know that, in many cases, friends are happy to be reminded of their debts — some people are just more forgetful than others. But, Levine says, "If the money isn’t repaid, don’t make the same mistake again."

You Lent Money to a Friend...and She Spent It Frivolously

It’s one thing to have a pal who complains about money being tight, yet always seems to have a new handbag to show off. It’s quite another when you’ve tried to help out said friend by lending her some cash, then you see that she bought yet another bag — on your dime this time.

However, Thakor says that, when you lend a friend money, it's best to release judgement — especially if the loan you gave didn’t have specific spending parameters attached to it. “If you make a loan without any caveat, it's controlling to then play judge and jury on how the funds were used,” she says. “Now, if you'd already agreed the loan would be to make the next car payment and instead the funds went for a vacation, then it's fine to say, ‘I loaned you money for X and you spent it on Y. That wasn't what we agreed. Why did you do that?’” Otherwise, it’s not your business — or your money — anymore.

Your Friend Asks, “How Much Did That Cost?”

Money can drive a wedge between friends, especially when one person feels like she doesn't measure up to the other in terms of her earning — and buying — power. But, in some cases, an acquaintance may ask you about the cost of large purchases, like a house, because they too are in the market and have a genuine curiosity about what you paid. If you don’t feel comfortable giving numbers, Levine says to simply tell her that you would rather not divulge that information.

But if you’re willing to chat numbers, here’s how to do it tactfully: Be transparent about your purchases to the point that you feel comfortable being transparent, Thakor says. “If it's a close friend, you may feel very comfortable talking price and even talking about the tradeoffs you made that enabled you to purchase that item, i.e. ‘Yes, we've been saving for the past few years, and now we have our dream home that we purchased for XYZ,’’’ she says. “To the extent we collectively share more decision-making though patterns around large purchases, we can help each other learn.”

You Can’t Keep Up With Your Friend’s Spending Habits

Gaps in income and spending habits can cause a sticky situation between friends. Perhaps you have a friend who continually invites you to do (and pay for) things with her — like attend a $25 hot yoga class or eat at the new restaurant in town — that are simply not in your budget (or rather, not things you want to spend your money on). Rather than feel guilty about continually declining, suggest other, less pricey outings you can go on together, like taking a hike or grabbing coffee.

But maybe the situation feels more one-sided: Instead of asking you to join her on pricey excursions, your pal (generously) sends you nice gifts for your birthday and holidays — say, a new yoga outfit from Lululemon or a gift certificate for a fancy cooking class — and you feel bad about not being able to reciprocate. "Your friend is likely aware of the discrepancy in income between you and her — and she isn’t expecting that your gift be of equal value," says Levine. "That’s not a gift; it’s a trade." So, while you don't need to reciprocate her yearly gift giving, you do need to acknowledge her generosity. You can show your gratitude in other ways, Levine explains, whether it’s a very personal thank you note or an invitation to dinner or an event.

You Have a Getaway Planned and Need to Split the Tab

Getting out of town with your girlfriends from time to time is often necessary for the sake of maintaining your sanity — and you can’t put a price on making new memories and seeing new sights with the women to whom you’re closest, right? Except, of course, vacations do come with a price tag and trying to split the tab on something as complicated as a group trip is bound to ruffle a few feathers.

The only way to ensure that everyone pays only her share is to purchase flights and rooms on separate accounts and ask restaurants to give everyone individual checks. However, keeping everything even can be a hassle when you’re traveling — especially when you have a large group or are in a foreign country. Besides, taking the time to divide every tab can take the fun out of the trip.

Some strategies to make these trips easier are to book at all-inclusive resorts or taking turns picking up the tab on meals (each person pays for X amount of breakfasts and Y amount of dinners — it should even out). But if your companions are sticklers about splitting things, Hill says there are two apps on the market, Share-a-bill and WePay, where you can wire your friends money for your share of a bill on the spot.

Everyone Wants to Split the Bill, But You Only Ordered an Appetizer

No one wants to be that person who stands up as the dissenter to the group's decision to split the bill, but it's better than resenting your friends, or yourself, for paying $50 for an order of mozzarella cheese sticks and a water.

To make this touchy situation as easy on everyone as possible, always come to group dinners with cash, Hill advises. Then, when the bill comes, offer to put down what you owe and then the rest of the group can split the remainder on their credit cards. Using cash will draw less attention to your request and will ensure that your server won't be confused by having to put a different amount on one card.

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